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Relationships between Different Types of Contracts
Many changes are happening in the building and construction industry. The upcoming and new methods of contracting seek to address the problems that characterize the current techniques. Using these new methods, contractors can be able to complete projects in time and stick to the contract’s specifications. Traditionally, construction contracts were engineered in such a manner that they were able to address three aspects.
These aspects include quality, cost, and time. Currently, these aspects have been updated to include safety, conflict, and environmental concerns. With the construction market constantly changing, contractors are finding it hard to stick to the contracts. The traditional form of contract is Design-bid-Build (DBB) and it is subject to various forms of controversy. DBB has been the source of conflict between contractors and clients.
In addition, most of the contracts that result in litigation tend to be DBBs. The Design-build (DB) contracts came into being in order to address the shortcomings of DBB. There are several similarities and differences between these two contract types.
In DBB contracts, there are two different kinds of contracts. The first contract is with a designer and the other contract is with a contractor. In DBB contracts, the designer is responsible of “developing, designing, and drawing up the project’s specifications while the contractor is responsible of supplying the methods, means, and construction input to the project” (Lowsley & Linnett, 2006).
In DB contract types, the project’s owner has a single entity. This contract covers all aspects of the project including designing and constructing. DB projects give the project owner the advantage of working with a single party throughout the project.
The contracted entity bears full responsibility of any mishaps that may occur during the contract. DB contractors can seek help with the project through the services of sub contractors. DB contacts can be led by either a designer or a contractor.
Both DB and DBB designs are subject to claims. Claims are requests that can be made by the contactor to adjust the terms of a certain contract. Among the aspects of the contract that can be adjusted through a claim include, deadlines and terms of compensation.
Claims are preceded by proposals or requests for changes in the original contract. Claims usually present a chance for both parties to negotiate openly and they may degenerate into conflict when they are not addressed.
DB projects provide the project owner with the best option of a fast project delivery. The bidding system in DB contracts saves the project owner a lot of time. In addition, the contractor can begin working on the project even before the details of the contract are finalized.
The fact that no other contractors take part in a DB contract gives the assigned contractor the confidence to work on the project without fear of delays. On the other hand, DBB contacts cannot start before the design process is finalized. This means even site preparation cannot begin before the design process is concluded.
DB contacts are less risky to the owner of the project than DBB contacts. In DB projects only one party is responsible for the entire project while in DBB contracts several parties would be accountable for several parts of the project. Several parties increase the risk passed on to the owner of the project. In addition, if problems occur in the course of the project there is little room for blame games when using the DB contracts.
The low risk also translates to lower commissioning costs for the project owner who chooses a DB contract. Existence of multiple contracts presents project managers with the headache of having to finance each contracting process. The process consumes a lot of time and resources.
There is literature that offers proof that using DB reduces the instances of claims in a project. In a study conducted to investigate the contact processes, it was clear that DBB methods increase the likelihood of finger pointing (Lowsley & Linnett, 2006). In this study, it was found that DB contracts are less likely present conflicts between contractors and project owners.
The conflicts usually lead to instances of finger pointing where contractors place blame escape responsibility by placing blame on their fellow DBB contractors. The traditional contacting method of Design-Bid-Build results in blames between different parties involved. It paves way for construction errors and omissions, limits coordination, and slows the communication thus delaying the project.
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This method also results to numerous problems that lead to claim, litigations, and damaged relationship between constructor, consultants, and clients. Where DBB contracts are employed, it is likely to delay the entire project because this process uses distinct design and construction phases (Keane & Caletka, 2008).
Keane and Caletka (2008) discovered that the DB process promotes collaboration and eliminates the need for strained relationships between contractors. Collaboration is fostered by the fact that all DB parties realize the need to work together. Nevertheless, this research revealed that there were still instances of internal wrangles inside the DB process.
These internal wrangles also result in delays even though they are not as long as the ones presented by DBB. In another study to evaluate the instances of delay in contracting process, it was discovered that DB and DBB were characterized by different instances delay. The design provided may take the constructor a longer duration to familiarize with it and find technical capacities that would correspond.
The client will be involved in most of the stages to ensure that he/she receives the desired construction and coordinate the other parties. Development of more advanced contracting methods such as Design-Build helps in eliminating these problems reducing on delays and eliminating some of the costs (Sanvido & Konchar, 1999). The management of the project becomes easier because the client entrusts the entire project to one constructor.
The employer passes the responsibility of the interfaces between different construction packages although he/she is involved in management of the design. The main claims raised by the contractor against the client were change in contract document, different conditions, and breach of contract.
Change in contract document occurs when the owner changes the order or give instructions that the constructor consider to change the contract terms (Beard, et al. 2001). It can also result from errors and omissions or other misrepresentations in the contract document that can cause liability to the contractor.
There are some conditions that go beyond the ability of the contractor and the owner, which include weather and site condition that could not be anticipated during the signing of the contract. Breach of contract occurs when the construction is not done to the expectation of the owner.
Experts suggest various recommendations when dealing with delays that arise from different contract types. Most of the recommendations focus on DBB the method that is more likely to result in delays.
The parties involved in construction industry should try to minimize delays by imposing roper management and procurement of materials. When giving out the contract, the owner should consider the competence of the parties involved and analyze the possibility of completing the project within the set period and the planned budget.
The constructor should ensure that he/she plans and account for unexpected occurrences that can delay the project. Before starting the project, it is prudent to consult all the suppliers of raw materials and other services to ensure that there is a constant supply throughout a construction to avoid stock-outs that in return delay the project (Quatman, 2001).
It is essential to engage in legal contract with the suppliers to avoid abrupt changes in supply terms that can result in escalation of material costs. When budgeting for the project, constructors should consider inflation changes that can affect the overall price of the contract and make provisions cater for such occurrences.
It is recommendable to consult all the parties involved in case of BBD contract, which involves different people. The roles of each party should be defined before the commencement of the project to ensure that there are delays that result from poor allocation of duties (Quatman, 2001). The contractors and consultants should work closely, which minimize delay since the approval is timely.
When BD contract is awarded, the constructors should ensure that the relevant procedures are put in place. The construction document should be understood before starting the project. This document should have provisions for unexpected conditions that can be beyond the ability of the involved parties.
Beard, et al 2001, Design Build: Planning Through Development, McGraw-Hill, New York.
Keane, PJ & Caletka, AF 2008, Delay analysis in construction contracts, Wiley-Blackwell, Oxford.
Lowsley, S & Linnett, C 2006, About time -: delay analysis in construction, RICS, Coventry.
Quatman, GW 2001, Design-build for the design professional, Gaithersburg Aspen Law & Business, Md.
Sanvido & Konchar 1999, Selecting Project Delivery Systems, Comparing Design-Build, Design-Bid-Build, and Construction Management at Risk, The Project Delivery Institute, PA.